FEDERAL INLAND REVENUE SERVICE (ESTABLISHMENT) ACT 2007:
AWA IBRAHEEM, PhD, FCA, ACTI.
ICMA Services (Tax Consultants),
3, Core Group Close,
Opposite Police Headquarters, Asaba.
This paper is sequel to the one jointly written by Messrs R. O. Jegede and AWA Ibraheem titled FEDERAL INLAND REVENUE SERVICE (ESTABLISHMENT) ACT 2007: CENTRALIZATION OF TAX ADMINISTRATION IN NIGERIA THROUGH THE BACK DOOR. The purpose of this paper is to briefly highlight matters arising from the enactment of the legislation under reference and to suggest necessary amendments that will make the Act federalism compliant.
The publication of the Federal Inland Revenue Service (Establishment) Act, 2007 (hereinafter referred to as ‘the Act’) led to the realization that all the existing major tax laws in the country have been put under the administration of the Federal Inland Revenue Service (FIRS). Putting under the administration of the FIRS the Personal Income Tax Act of 1993 (PITA) and other tax laws for which the State Inland Revenue Services (IRS) were established to administer, ipso facto, means centralization of tax administration in the country if not outright extermination of the IRS.
The Act was passed into law in May 2007. After carefully studying the provisions of the Act, we petitioned the National Assembly and copied chairmen of 36 state Inland Revenue Services. We also petitioned all the 36 governors and published articles in some national dailies drawing the attention of stakeholders to the fact that the Act, if enforced, would lead to centralization of tax administration in the country. This is, in our opinion, against the concept of federalism as stipulated in the 1999 constitution.
After absorbing the realities of the Act, it is pertinent for all the stakeholders to address three issues arising from the new dispensation. The first issue to be addressed is whether the real intention of the Act is to centralize tax administration in Nigeria her federalism not withstanding. If the real intention of the Act is centralization then the second issue to be addressed is whether the federal government is really serious in implementing the Act in its present form. Finally, it is interesting to find out whether the draft of the Act submitted to the National Assembly has the support of the Joint Tax Board members most of whom (as the state IRS chairmen) the Act has the tendency of rendering jobless.
REAL INTENTION OF THE ACT
It has been suggested in some quarters following earlier petitions and publications that the intention of the Act is not to centralize tax administration in the country regardless of its wordings. This suggestion is baseless given the objective of the Act as stated in the brief that accompanied the draft bills on tax reforms to the National Assembly. For instance, in the preamble to the briefs, one of the salient issues in the bill is that the FIRS believed it did not have enough powers to administer taxes for which it was responsible hence “… the FIRS Bill seeks to confer on the FIRS a composite set of powers for the wholistic enforcement of all tax types.”
In order to clear the ambiguity contained in the above statement of intention, the FIRS later in the same brief to the National Assembly made suggestions that are external to the bills under consideration including Centralisation of Tax Collection under a “Nigeria Inland Revenue Service” that is fully accountable to the National Assembly as is obtainable in most other countries and is being considered in all others given the fact that it addresses improved effectiveness and efficiency of Tax Collection.
In order to ensure that the centralization was achieved without leaving any loophole that might derail the real intention, FIRS again suggested that the amendment of the PITA should consider “Centralisation of Personal Income Tax Collection which is currently a Federal Law but administered by the States, for improved effectiveness and efficiency”.
It is clear from the above quoted statements that the intention of the FIRS that happens to be the major promoter of the Act is to centralize tax administration in the country.